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No Lag in North American Gas Development, Says ExxonMobil Exec

Natural gas is going to eclipse coal to become the second biggest fuel source after oil, and even though prices aren't cooperating, ExxonMobil Corp. has no plans to slow its North American gas projects, an executive said last week.

Times may be challenging, but "now is not the time to slow down investment activity or technology development in oil and gas," said Senior Vice President Mark W. Albers, who was keynote speaker Wednesday at the Barclays Capital 2009 CEO Energy/Power Conference in New York City. "Significant volatility" in energy prices and fall-out in the financial markets cut across the sector. But "really, it isn't anything unusual that as a business we shouldn't have been prepared for."

A review of the U.S. gas rig count is enough to determine that in the near term, the outlook for natural gas is poor, Albers said. But ExxonMobil does business for the long haul. "Oil and natural gas will continue to play a critical role, and they will supply the majority of global fuel for the coming decades...," he said. "When you factor in natural field decline, it's clear that significant capacity is going to be needed."

Because of its long-term forecast for oil and gas, ExxonMobil will continue to invest in finding new resources and developing new technology, said Albers. ExxonMobil is holding to a forecast that global energy demand will grow 35% by 2030, "even with efficiencies," Albers said. Earlier this year CEO Rex Tillerson said that to 2030 and beyond, only fossil fuels will solve the growing demand for energy (see NGI, June 1).

"Much of the demand" for natural gas "will come from the power generation sector," Albers said. "There will be a steady rise in North America and in Europe..." And use of natural gas will grow not only because it is cleaner than coal, but also because reserves are growing worldwide, he noted.

"North American natural gas production will remain steady," Albers told the audience. "Conventional gas will decline, but it will be offset by tight gas and shale gas. Demand growth of 1% a year will mean imports will be up 10% by 2030 to keep pace," fueled not from Canada or markets to the south of the United States, but by liquefied natural gas.

"A long-term mindset is critical," he said. "Innovations are essential."

Consistent with its philosophy to keep looking beyond today's U.S. gas prices and oversupplied markets, ExxonMobil plans to participate in "about 50 new wildcat wells by the end of 2010 in about a dozen new plays or basins," said Albers. "Some have very high potential, and some are also high risk." Among the North American targets are the Horn River Basin in British Columbia (see related story), the Haynesville Shale and the Gulf of Mexico. Development also is under way in the Beaufort Sea offshore Alaska and in Canada's Orphan Basin.

Don't expect gas to be curtailed in Colorado's Piceance Basin, said Albers. ExxonMobil's Piceance Phase 1 project, with capacity to process up to 200 MMcf/d of gas, ramped up in June at 80 MMcf/d (see NGI, June 29). Seven gas rigs now are running, and the company has no plans to curtail any output, said Albers.

"This is a world class resource with an estimated 45 Tcf gross of natural gas in a very favorable area of the basin," he said. "We are developing it with global best practices...and relentlessly pursuing efficiencies at every stage. We have about seven rigs in operation, at the very time that our competitors are scaling back...This is another example of our long-term view."

In addition, gas production is on schedule to ramp up at the Point Thomson Unit in Alaska by the end of 2014. A second well reached its target depth of 4,875 feet, and the two wells are scheduled for completion to their final depths by the end of 2010. ExxonMobil is partnering on the project with BP Exploration (Alaska) Inc. and ConocoPhillips Alaska Inc.

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